CW Research: World cement market: outlook through 2022 upgraded, challenges abound

Global cement consumption is projected to expand 2.2 percent per year on average in the period from 2017 to 2022, reaching 4.7 billion tons

Cement demand is picking up in advanced economies, but facing slower growth in developing economies. Outside China world cement demand is expected to grow faster at 3.9 percent, according to CW Research's 2H2017 update of the Global Cement Volume Forecast Report (GCVFR).

ÔÇ£For the cement industry, spillovers from global political instability and policy insecurity, possible trade wars and geopolitical risks affecting the economy and the construction sector continue to keep the overall market sentiment depressed throughout 2017. However, the global picture in terms of cement demand points out towards a more positive futureÔÇØ, observes Robert Madeira, CW Group Managing Director and Head of Research.

Construction outlook revitalized by outperforming economies

The surprisingly positive economic performances of some regional markets have invigorated their construction industries, in turn leading CW Research to revise its previous forecasts upwards.

For the U.S., CW Research upgraded its cement demand forecast due to the more encouraging macroeconomic indicators, combined with a lower-than-expected impact of the 2016 elections. The housing industry is boosting the construction sector and driving demand for cement, as mortgages increase in number and value. Despite international sanctions, Russia's improved economic performance so far in 2017 positively impacted the federation's construction sector, translating into a 3.0 percent upward revision in 2017.

Political stability and infrastructure investment support recoveries

Globally, Asia ex-China appears as the fastest growing region, with markets in the Indian subcontinent leading the expansion. In India, large infrastructure plans and affordable housing programs are expected to drive cement demand at a seven percent average yearly increase.

Regionally, China will continue recording a moderate forward growth, backed up by infrastructure investments through government's initiatives, following a better-than-expected economic performance in 2017.

Western Europe has also recorded a sustained positive trend in the construction sector in the first half of 2017, leading to improving performances in France, Germany and Spain. A better momentum in the regional cement market and the stabilization of the political landscape are attracting new investment and increased market consolidation.

Markets turn a corner

Markets that are still afflicted by political and economic setbacks are taking a longer and bumpier route towards recovery, all the while tempering global cement consumption in the midterm.

ÔÇ£In the short term, several important cement markets, such as Brazil and Italy, will still struggle through their recessions and act as a drag on growth within respective regions. Nevertheless, markets that have resurrected from the ashes, such as Spain and Russia, are pushing the markets forward. Towards the end of the forecast period, we expect overall mild positive growth, with markets which are now wild cards making hefty steps towards stability,ÔÇØ stressed Robert Madeira.

China eliminates cement production capacity

In 2017, global cement production capacity has reached 5.5 billion tons, 56 percent of which is located in China. Over the previous five years, the share of the country's capacity out of global has been declining, driven by investments in traditionally importing markets.

Global capacity additions are thus expected to continue to slow down, primarily restrained by the contraction in China. The country is expected to eliminate about 280 million tons of capacity by 2022, therefore counterbalancing capacity additions from Asia ex-China and Africa.

 

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